No simple strategy to avoid taxes on US Saving Bonds

Q: Is it possible to donate US Savings Bonds to charity and thereby avoid paying taxes on the interest earned?
T.T., via e-mail

A: The simple answer is, no. The US Treasury will not allow you to change the registration on a Savings Bond to a charity, says Tom Adams, editor of www.savings-bond-advisor.com.

But you can always cash the bond, donate the proceeds to a charity, and then take a charitable deduction on your tax return. In a sense, this amounts to the same thing, but he says there are a few things you need to consider.

For example, you can't take a charitable deduction that's more than 50 percent of your adjusted gross income in a single tax year. If you donate more than that, you may be able to carry over the excess to the following tax year, but there are limitations on this, too.

In addition, for some organizations such as cemeteries, fraternities, veterans organizations, and some private foundations, the limit is 30 percent. You also need to be careful of any Alternative Minimum Tax implications.

If you're still interested, Mr. Adams would direct you to the IRS website (www.irs.gov). Search for Publication 526, Charitable Contributions, which will give you more details.

Q: I still have student loans to pay for my MS degree in computer science. Between degrees, I consolidated my loans to what, at the time, was a very low 6.125 percent. I now pay $285 in interest per month plus an extra $50 toward the principal. I tried to lower my interest rate, but since it is now fixed, I can't do anything about it. Do I have any other options besides just paying more?
M.H., via e-mail

A: You're probably out of options on this one, says Gary Webb, CEO of Webb Financial Group in Bloomington, Minn. That's because you already consolidated your loans, and the rules of the game allow this to happen only once.

You might have a chance at a second consolidation if you subsequently took out another student loan that wasn't consolidated into the first batch. If that's the case, contact the company that holds your loan and explain the situation.